Daniel Ek warns Sweden that Spotify may be forced to grow elsewhere

Spotify co-founders Daniel Ek and Martin Lorentzon have warned Swedish lawmakers that they are throttling local business – and risk losing Spotify’s future business expansion to other parts of the world.

In an open letter on Medium (in Swedish), Ek and Lorentzon ask whether the Swedish government wants ‘to be a country that believes that growth come from fast-growing new companies or from traditional industries’.

The duo point to preferable tax structures in the US for giving employees stock options, and warn that ‘we are now considering if we should grow in New York instead of Stockholm’.

As English-speaking readers can read in the (roughly) translated blog post below, Ek (pictured) and Lorenzton highlight three key areas for change in Sweden to, as they see it, allow startups to thrive beyond their initial growth stage…

We need to act or we’re going to be run over!

Sweden needs to decide what kind of country we want to be when it comes to development and establishing successful startups. Sweden needs to decide if we want to be a country that believes that growth come from fast-growing new companies or from traditional industries.

We believe there are some political issues today that hold back the new business age we are now facing globally. Therefore, we are now unfortunately forced to state that if no changes are made, we must consider to expand more in other countries instead of Sweden.

We have identified three political issues that need to be changed. The following issues are:

  1. Lack of accommodation, especially rental housing for young professionals: in cities like New York, London and Singapore the opportunities to rent housing is very simple. There is, unlike in Stockholm, flexibility. Sweden needs to increase the access of rental housing in order to not lose its attractiveness.
  2. Our education system: The need for programmers and developers is enormous, and therefore we need to focus on how we can educate more students into these subjects. We need to introduce programming to students in an early age, and not only in universities. Moreover, we need to work on how we don’t lose female programmers as much as possible. 
  3. The ability to do our employees to shareholders: In order to attract young talents to Sweden we must offer competitive salaries, generous benefits and stock options that allows employees to receive a share of the value we create. The current tax rules in Sweden makes it almost impossible for stock options. Swedish politicians have now presented a new proposal, however the inquiry that has been made is beneath all contempt. The report describes the benefits of employee stock options well, though the proposal has many restrictions. For example, the report suggests to only cover companies under 50 employees which have not being active more than seven years, and additionally excludes certain industries. A company like Spotify are therefore not covered at all by the commission’s proposals. The Swedish politicians must recognize that we are competing on a global talent market, and the price for worse conditions will harm the county.

As a consequence, we are now considering if we should grow in New York instead of Stockholm. (In the US, stock options are taxed to the employee as income from capital at a rate of 15-20 per cent. In Germany the level is 25 percent. In Sweden it is considered today as income from employment and thus taxed at 70 percent.)

A simple system with stock options could quickly be introduced in Sweden. However, a political will is required. For a company like ours, this is necessary if we want to attract the best talent.

We as owners are willing to share with our employees. If the ownership is spread, it will create solidarity within the company.  In our opinion the Swedish policy is now standing at the crossroad: either implement a policy to promote the new business age, or choose to ignore the fact that a lot of companies will start consider, like us, to move their business abroad. As a result, Sweden and Stockholm will lose in the global competition.

It’s time for action. Politicians – your move!  

/ Daniel Ek and Martin Lorentzon, co-founders SpotifyMusic Business Worldwide

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