By Henrik Molin, CEO & co-founder, Physitrack Plc
In December of 2020, I gave the green light to kickstart the Nasdaq First North IPO of my healthtech company Physitrack, which I founded with a friend back in 2012. “Wait… what?” said several people about my conviction around the IPO at that relatively early stage, with Physitrack’s annual revenue at the €7 million mark (which was 3.5 times what it had been just a few months earlier, by the way, but that’s a different story).
From an international perspective, my IPO move was seen as very unusual, as VC funding is generally seen as the only source of acceleration capital for scale-ups. An IPO was generally seen as an exit tool, not an acceleration tool, and I did have some explaining to do - luckily, to a very small cap table, which mainly consisted of friends and family.
I, however, had no doubt that an IPO was the best way forward, as the concept of using the public markets as a source of capital was ingrained in me over decades of living and breathing entrepreneurship and the equities markets in my native Sweden.
You see, this cold and, in the north where I'm from, mostly snow-covered nation has a unique effect on many of us "Polar Bear entrepreneurs". Decades of societal emphasis on the importance of small business building, innovation, and using equities to build and retain wealth have shaped us. This focus, combined with efforts to keep the wealthy within the country, is supported by a tax and education system optimised for this purpose.
It also helped that Nasdaq Nordic launched its First North segment in 2009 and once and for all hammered home that there was a solidly paved way for smaller companies to attract capital from a wide range of investors. The public markets were not just for big blue chips; they had been made much more accessible with suitable, lighter-touch regulation and reporting requirements, alongside a widespread investor following.
Based on my own experience, and looking at the effect that this “Swedish model” has had on our entrepreneurial and wealth accumulation landscape—as described and quantified in these two excellent articles in the Financial Times (How Sweden’s stock market became the envy of Europe) and the BBC respectively (The Rise of Sweden’s Super Rich) it is my firm belief that the Swedish model around entrepreneurship, taxation, wide equity ownership, and public markets is the perfect methodology for establishing an investment environment that can support the emergence of Europe as a tech continent that can rival the US in the next decade (an initiative very well described in Boardwave’s 2024 white paper on the subject).
There are six key initiatives, as far as I am concerned, based on the “Swedish model” and my own experience in listing a scale-up:
1. Tax systems that support share ownership and investments
Society-wide education via the pension system, such as Sweden’s Orange Envelopes with the ability to allocate pensions to fund managers introduced in the 1990s - to the whole working population, even 18-year-olds - did wonders for the understanding of equity markets in Sweden.
By creating tax incentives for individuals to invest in the stock market via "investment savings accounts", with flat taxes on the invested amount rather than capital gains tax, Sweden fostered a culture of financial literacy and long-term wealth building. This approach not only democratised wealth creation, allowing more people to benefit from the growth of successful companies, but it also broadened the base of investors. Such a tax system can drive inclusive economic growth, reduce wealth inequality, and ensure that the prosperity generated by our economy is shared more equitably across society. Encouraging widespread share ownership aligns the interests of the public with those of businesses, creating a more robust and resilient economy.
2. Government-backed initiatives for talent recruitment, incentivisation and retention.
By creating generous immigration structures to support tech founders in recruiting international staff, and by offering competitive tax structures for stock option issuance, governments can foster a thriving entrepreneurial ecosystem and prevent the brain drain to Silicon Valley. These measures make it easier for scaleups to attract and retain the best global talent, essential for driving innovation and growth.
3. Active stock exchanges
As we learned from Nasdaq Sweden’s Adam Kostyal's and Niclas Holmberg’s relentless efforts to demystify the public markets via one-on-one meetings and thereby attracting hundreds of companies to Nasdaq First North, engagement between stock exchanges and entrepreneurs is pivotal in promoting the advantages of public listing. When stock exchanges actively educate entrepreneurs on the benefits of going public, they illuminate pathways to increased capital, enhanced visibility, and greater credibility. By fostering understanding, stock exchanges not only support the entrepreneurial ecosystem but also ensure a steady pipeline of innovative companies contributing to market dynamism and economic vitality.
4. Faster time to money for bankers
If banks can choose between a private round that closes in weeks versus an IPO that takes up to a year with uncertain payoffs (IPOs typically do not pay banker fees until they close), the choice is clear: private fundraising wins. If timelines for listing can be shortened, with companies achieving IPO readiness earlier in their lifecycle, coupled with more straightforward legislation, banks will be keener on pushing companies down the IPO path.
5. Pan-European regulation
The creation of a unified equity market regulation and the establishment of a European SEC is essential for the development of a cohesive and robust financial market in Europe. A harmonised regulatory framework would streamline compliance, reduce administrative burdens, and eliminate discrepancies that currently exist between different national regulations. This would create a more transparent and efficient market environment, enhancing investor confidence and fostering cross-border investments. A European SEC would serve as a centralised authority to oversee market activities, enforce regulations uniformly, and protect investors, ensuring a level playing field for all market participants.
6. Merge European exchanges into a European Nasdaq
The creation of a European Nasdaq instead of local exchanges and applying First North-like rules to one of its listing tiers would be a game-changer for developing a deeper and more liquid equity market, especially for scaleups. A vibrant market environment fosters greater investor confidence and participation, ultimately enhancing market liquidity and depth.
I know we can get this right.
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