Venture Capital 2025 Comparisons

Sweden, long recognised as the Nordic region’s most active and mature venture capital ecosystem, experienced a slow start in 2024 and a decline in funding by nearly 50% compared to 2023. Deal activity remains significantly below record levels seen in 2021–2022 (according to PitchBook data). However, signs of stabilisation and recovery began to emerge in the second half of 2024 and is continuing into 2025.

• Fundraising: The fundraising market has remained active and investor confidence in the Swedish ecosystem is visible through several successful fund closes in 2024. Norrsken VC Fund II (co-founded by Klarna co-founder Niklas Adalberth) closed at EUR320 million, making it the largest early-stage generalist impact fund in Europe. Creandum VII, one of the region’s most established early-stage investors, closed at EUR500 million, placing it amongst the top ten fundraisings in Europe in 2024. These dry powder reserves are expected to fuel early-stage activity across Sweden in 2025 and beyond, especially in purpose-driven tech.
• Financing: Despite the general slowdown, a number of noteworthy financing rounds took place on the Swedish market in 2024. Stegra (formerly H2 Green Steel), a company aimed at revolutionising the “hard-to-abate industry” (starting with steel) by producing green hydrogen and green iron to replace fossil fuels like coal and natural gas in the production process, raised EUR4.5 billion in equity and debt as well as received state aid of SEK1.2 billion (amounting to approximately EUR105 million at the time), making it one of Europe’s largest-ever climate tech financings. Aira, a provider of clean energy-tech solutions with intelligent heat pumps at its core business, raised a EUR243 million Series B round. Qvantum Energi, a company focusing on developing and manufacturing sustainable heat and cooling solutions, raised a EUR108 million Series C round. Heart Aerospace, a hybrid-electric airplane maker with an aim toward sustainable regional air travel, secured USD107 million in its Series B round. In early 2025, Neko Health, a preventative healthcare technology company co-founded by Daniel Ek (Spotify), closed a USD260 million Series B round, and evroc, which is creating a sovereign hyperscale cloud and AI infrastructure, closed a USD55 million Series A round, marking it one of Europe’s largest Series A financing rounds in the tech sector. These deals reflect deepening conviction in climate and health-oriented technologies, but also continued support for the tech sector.
• Exits: Exit activity remained subdued on the Swedish venture capital market in 2024. A few exits occurred but nothing comparable to landmark exits in previous years. In 2024, Mastercard’s acquisition of fintech start-up Minna Technologies (at unclosed value) as well as Norvestor’s (a Nordic private equity fund) acquisition of Wint at a value of EUR44 million are two of several exits so far.
• IPOs: While the Swedish IPO market has recovered from the all-time lows during 2022 and 2023, the market has not experienced any significant listing by venture capital-backed companies in the last 12 months, except for Cinclus Pharma and GreenMerc in June 2024, as well as Yubico’s de-SPAC listing in 2023 and subsequent uplisting to the main market at Nasdaq Stockholm in 2024 (without any new shares issued). One of the most hyped IPOs of a Swedish venture capital-backed company during 2025, is the IPO of the Swedish fintech company Klarna in the US, which was expected during H1 2025 but, at the time of writing, has been postponed due to market volatility and valuation uncertainty.
• Bankruptcy: In March 2025, Northvolt filed for bankruptcy proceedings in Sweden (after a Chapter 11 filing in the US in November 2024), after securing over USD15 billion in funding since its founding, including a USD5 billion green loan in early 2024. Northvolt’s collapse leaves Stegra as the bellwether for climate tech in Europe and has prompted broader questions around the viability of capital-intensive gigafactory ventures.

Following the valuation peaks during the record years of 2021–2022, the beginning of 2023 proved challenging for many Swedish start-ups. A combination of higher interest rates and geopolitical uncertainty led to a contraction in the availability of venture capital, resulting in a subdued fundraising climate, save for start-ups within clean and climate tech with Stegra (formerly H2 Green Steel) taking pole position in 2023 with its EUR1.5 billion financing from an investor group led by Altor, CIC, Hy24 and Just Climate.

While there was optimism at the outset of 2024, driven by expectations of interest rate reductions and market recovery, conditions remained constrained. Investors continued to focus on the increased cost of capital, whereas many founders remained anchored to prior-cycle peak valuations. This disconnect contributed to a continuation of the trends observed in 2023, with founders favouring convertible instruments and bridge financings over a down round.

As a result of the continued challenging financing climate during 2024, many investors shifted their focus from primarily assessing the potential of rapid growth, to also include sustainable growth, profitability and a clear exit route in the equation. The emphasis is now more on business models that balance revenue generation with long-term viability, predominately in sectors such as fintech and software as a service (SaaS), where the previous mindset of “growth at all cost” is being replaced by more strategic approaches. At the same time, the LPs of venture capital funds are becoming increasingly more demanding, wanting to see actual returns on their investments rather than being satisfied with a hypothetical figure derived from the most recent funding round.

Despite these pressures, the second half of 2024 and first quarter of 2025 saw a clear uptick both in fundraising activity and valuations, as more companies returned to the market and investor appetite improved. Foreign investors were further incentivised by the weak Swedish krona, enhancing the appeal of Swedish investments. There has also been a noticeable shift amongst investors preferring to deploy their capital in early-stage companies which are less capital-intensive and require less frequent capital injections, such as fintech and SaaS. This said, start-ups within the deep tech segment have seen a rise in both number and size of investments during 2024 despite those companies requiring substantial capital before reaching the commercial phase and seeing any meaningful revenue streams. This could be seen as an indication of investors’ willingness to support ground-breaking impact technologies which, while capital-intensive, benefit from a clear competitive advantage due to high technological barriers to enter the segment.

Another important and noticeable trend during 2024 was Sweden’s progression towards promoting diversity within the start-up ecosystem, where 15% of all venture capital funding was received by female-led companies – one of the highest in Europe (according to an article published by Tech.eu in January 2025).

Sweden, with its mature venture capital ecosystem and reputation as a “unicorn factory”, continues to foster and host a significant number of high-value start-ups, particularly in the technology sector. In 2024, Swedish tech companies raised close to 8.4% of all of the European tech funding, placing Sweden second in total funds raised across Europe (up from fifth place in 2023). This underscores the enduring strength and global competitiveness of Sweden’s tech-driven innovation landscape and the continued importance of this industry in Sweden.

Traditional verticals such as fintech, healthtech and SaaS remained leading drivers of the Swedish VC activity in 2024. They were joined by a cohort of companies in climate tech, clean tech, transport and energy, which continued to attract investment despite broader macroeconomic headwinds. Emerging industries such as artificial intelligence (AI), deep tech, and sustainability are also gaining momentum, in line with the global venture trends, as well as Sweden’s strong R&D-driven innovative culture.

Sweden’s innovation credentials remain robust; it ranked second in the World Intellectual Property Organisation’s (WIPO) Global Innovation Index and was among the top ten countries globally in patent filing.

Deep tech – encompassing fields such as advanced computing, AI, infrastructure, energy systems and synthetic biology – continues to play an increasingly important role in the Swedish venture ecosystem. These companies, often rooted in fundamental scientific or engineering breakthroughs, typically require significant capital and longer development cycles before reaching commercialisation. Despite this, Sweden has seen sustained investor interest in deep tech, aided by the country’s world-class research infrastructure, top-tier universities, and a legacy of technological advancement.

A number of Swedish venture firms have dedicated arms or funds focused on impact and deep tech investing, and there is a growing number of investors demonstrating higher risk tolerance in return for the potential of transformative returns. That said, a funding gap persists at the scale-up and growth stages for deep tech ventures, reflecting broader trends across Europe.

Sweden’s 2023 accession to NATO and heightened commitment to defence spending has generated increased attention to dual-use technologies – those with both civilian and defence applications. While this segment is still nascent and not expected to become a primary driver of Swedish VC activity in the near term, investor appetite is clearly shifting. A growing number of Swedish dual-use start-ups have begun attracting early-stage capital as the national focus on defence innovation, security and strategic autonomy gains momentum.

A distinction can be drawn between industries that continue to attract successive rounds of financing (such as deep tech, AI and climate tech), and those that see more frequent exits, particularly via trade sales or public listings. For example:

• fintech and SaaS companies remain prominent among VC-backed exit activity, given their shorter time to market and well-defined acquisition pathways;
• deep tech and climate tech sectors, while vibrant in terms of early- and mid-stage funding, tend to have longer holding periods and fewer short-term exits, due to their complex R&D cycles and capital intensity.

In Sweden, venture capital funds typically use limited liability companies (aktiebolag). The ownership of the fund is made up of passive investors, as well as the fund managers (which manage the fund’s daily operations, including leading investment decisions, formulating the strategy and engaging with the portfolio companies). The investment committee (which is usually comprised of senior partners and top executives of the fund) is typically responsible for ultimately approving investments and exits in accordance with the fund’s strategy.

Typically, investments in a Swedish venture capital fund are made by subscription of preference shares (ie, equity investment). Within such framework, the participation is governed by a shareholders’ agreement. It is not unusual that certain funds also allow participation through equity-like loans in order to accommodate varied needs of investors from different jurisdictions. In case a venture capital fund allows participation through debt, the participation is usually governed by a debenture agreement (with substantial similarities to that of a shareholders’ agreement).

Certain investors may also request to enter into side letters to address specific needs including as a result of a fund being backed by investors demanding certain rights applicable also in relation to the underlying portfolio companies (eg, information and/or inspection rights).

In Sweden, fund initiators, managers and/or principals (collectively referred to as "Fund Principals") typically participate in the economic upside of a venture capital fund through a combination of the following mechanisms.

• Management fees: Fund principals typically earn management fees, which are a percentage of the committed capital or assets under management. This fee, which is typically between 1.5–3%, compensates them for the operational and administrative costs of managing the fund.
• Carried interest: The primary source of upside for fund principals is through carried interest. This is usually structured as a percentage (typically between 20–30%) of the fund’s profits via a European waterfall (whole of fund model).
• Fund commitment: Fund principals typically invest their own capital (typically between 2–4%) into the fund, either as direct investors in the fund or indirectly via co-investment vehicles. This serves to align interest with the investors and satisfy expectations of “skin in the game” and enabling them to benefit from the fund’s overall success.
• Direct co-investment opportunities: Fund principals may also have the right to participate in direct co-investments alongside the fund in specific portfolio companies, enabling them to share in the potential upside of successful investments.

These mechanisms ensure that fund principals are incentivised to maximise the fund’s performance, aligning their interests with the investors and promoting effective management of the fund’s investments.

Swedish venture capital funds are typically regulated under the Alternative Investment Fund Managers Act (the “AIFM Act”), which implements the European Union’s AIFM Directive (the AIFMD). The AIFM Act governs authorisations and operations for alternative investment fund managers in Sweden, under the supervision of the Swedish Financial Supervisory Authority.

Exemptions apply under EU frameworks such as EuVECA and ELTIF. EuVECA allows eligible managers to market venture capital funds targeting early-stage SMEs across the EU, while ELTIF supports long-term investments in infrastructure and sustainable projects within the EU, accessible to both professional and retail investors within the EU.

Sweden is recognised as the Nordic region’s most active and mature venture capital ecosystem, with a strong tech focus. The Swedish VC fund environment remains dynamic and continues to evolve in response to both local innovation and global investment trends.

Reflecting Sweden’s broader ESG focus and strong innovative culture, Sweden has several dedicated impact funds such as:

• Norrsken VC – Europe’s largest early-stage generalist impact fund and early investor in Northvolt and Einride, which targets companies addressing societal challenges through technology;
• Industrifonden – a government-controlled Nordic evergreen fund with USD600 million in assets under management, which backs early-stage technology and life science companies with international potential;
• Summa Equity – investing in start-ups aligned with the UN Sustainable Development Goals;
• Vargas Holding – is not a traditional VC fund but a long-term greenfield impact investor that identifies, validates, finances, launches and scales impact companies from scratch, including Stegra, Polarium, Northvolt and Aira, focusing on high-impact sectors such as clean energy, mobility and sustainable material; and
• Impact Invest and Trill Impact – employ a private equity strategy to achieve significant and measurable impacts while also delivering financial returns.

Sweden also maintains a long-standing tradition of government involvement in venture capital with government-controlled funds such as:

• Almi Invest – which is recognised as one of Sweden’s most active early-stage investors;
• Industrifonden – which operates as a foundation that invests in Swedish companies with international growth potential and focuses on advanced technologies addressing significant societal challenges;
• Saminvest – which serves as a fund-of-funds investor aimed at stimulating the private venture capital market;
• Energimyndigheten Holding AB – the Swedish Energy Agency’s investment company, which collaborates with InnoEnergy to invest in innovations relating to energy.

These government-controlled funds have played a crucial counter-cyclical role, particularly during periods of global downturn or tightening capital markets.

With the exception of Saminvest and Swedish Venture Initiative, there are very few fund-of-funds on the Swedish VC market.

There is growing discussion around continuation funds and other secondary structures within the VC market in Sweden, particularly among more mature VC funds seeking liquidity for older assets and in light of extended exit horizons in certain verticals such as deep tech and life science. While continuation funds are still very uncommon in the Swedish VC market, such structures have been observed among later-stage growth and PE funds. Furthermore, evergreen funds (which typically, unlike other funds, do not have a fixed investment period and/or end date) are also growing increasingly common on the Swedish market. During 2024, Northern Horizon launched its first evergreen fund with a specialised focus on social infrastructure. Also, as mentioned above, Industrifonden has an evergreen structure in place in order to be able to focus on long-term value creation rather than short-term returns. Evergreen funds are, however, still more common on the private equity side, noting in particular that EQT communicated that it intends to expand its offering with an aim to have up to five active evergreen funds within the coming year.

The level of due diligence conducted by VC fund investors in Sweden varies, mostly depending on the relevant investment round, valuation and size of investment as well as the particular industry of the target and the relevant legal risks. The due diligence is also tailored based on issues that are specific for the fund, including ESG if the fund has adhered to the SFDR framework.

For investment in early-stage start-ups, the legal due diligence can be rather limited, with the investor’s main focus being on the commercial/financial aspects and the business plan. In later-stage VC investments and growth, the due diligence is generally more robust and in line with what one would expect in an M&A transaction.

Typical key areas of focus for VC fund investors in Sweden are:

• title and ownership – capitalisation table, dilutive instruments and any incentive schemes;

• employment terms – founders and key employees’ employment agreements, verification of existence of non-compete/non-solicitation clauses, confidentiality clauses and sufficient assignment of intellectual property rights;

• IP/ownership of technology – ownership and robustness of IP needed to run the business, particularly if third-party consultants have been engaged in development;
• material agreements – critical agreements that underpin the business model and operations;
• regulatory – assessing regulatory requirements or approvals, including whether the target’s business is subject to the FDI Act (which, if applicable, will prolong the time necessary between signing and closing of an investment); and
• disputes – ensuring no major ongoing disputes.

In Sweden, the timeline of a new financing round in a growth company with a new lead investor can vary, and the trend over the last year is that it has expanded somewhat. In 2025, the expected timeline is typically between four and eight weeks, subject to regulatory approvals and investors’ requirements. If a term sheet is agreed upon, which is typically the case, the timeline can be shorter.

In new financing rounds in growth companies, the lead investor typically takes an active role and has its own legal counsel. Other larger new investors may engage separate counsel, depending on size of investment and alignment of interest, while smaller investors tend to follow the terms negotiated by the lead investor, without engaging own counsel. The company will have its own counsel. Whether founders and existing investors have the same counsel or not largely depends on how aligned their interests are in the new round. The target is often required to cover reasonable legal fees of the lead investor, subject to a cap.

A new financing round in growth companies will typically require amendments to or deviations from the shareholders’ agreement to which all existing shareholders are parties. Consequently, the existing shareholders need to agree to amend (or replace) the shareholders’ agreement in order to complete the new round, which typically requires that all shareholders agree. Swedish law-governed shareholders’ agreements sometimes contain provisions such as that 90% of the shareholders can amend the agreement or power of attorneys, but they are seldom relied on in practice due to enforcement and revokement risks under Swedish law.

In Swedish start-ups, “ordinary shares” (as they are more commonly referred to in Sweden) are typically held by founders, key employees and potentially a few very-early-stage investors. Ordinary shares have voting rights (all shares in Swedish limited liability companies must have voting rights – ie, it is not possible to issue non-voting shares, and no share may carry voting rights that are more than ten times greater than the rights of any other shares), but they are typically last in the equity waterfall and last to be paid out in a liquidation event.

Later-stage VC investors, typically invest via preference shares that sit higher up in the equity waterfall and have rights that are more advantageous than ordinary shares, such as liquidation, anti-dilution and distribution preferences. The standard practice in Sweden is to issue non-participating preference shares with a 1x liquidation preference. However, during the last years, some founders and existing investors have been forced to agree to more aggressive liquidation terms due to fundraising challenges in the prevailing market to avoid down rounds.

In Sweden, the typical key documents representing a financing round in a growth company include the following.

• Term sheet: Non-binding document outlining key terms of the investment round. Even if the term sheet is non-binding (save for with respect to “no-shop”, confidentiality and governing law), it is nonetheless typically strictly adhered to by Swedish VC investors and considered morally binding by the parties.
• Investment/subscription agreement: Binding agreement between the investors, the company and the founders/existing shareholders, setting out the number and classes of shares to be subscribed for, subscription price and representations and warranties provided to investors as well as any conditions to closing and actions at closing.
• Shareholders’ agreement: Binding agreement between the shareholders and sometimes, even if uncommon in Swedish governed agreements, the company, governing the relationship between them. Key provisions include:
1. governance and investor protection rights, including board nomination rights, reserved matters and information rights;
2. participation rights, such as pre-emptive rights for new financing rounds (usually with exceptions for incentive programmes, distress issues and M&A activities undertaken by the company);
3. transfer restrictions, including right of first refusal, drag-along, and tag-along rights (with exemptions for “permitted transfers”);
4. founder vesting and lock-in arrangements (not standard);
5. anti-dilution and down-round protection (not standard);
6. liquidation preferences;
7. exit provisions; and
8. non-compete and non-solicitation provisions.

• Articles of association: The company’s constitutional document, which is rather standardised and sets out, inter alia, the share capital, number of shares and any share classes with related rights – eg, liquidation and distribution preferences and voting rights (maximum 1:10) and restrictions on the transfer of shares (which are limited to consent clause, right-of-first-refusal and post-sale purchase right).

In addition to the above, certain corporate documents are also required, such as minutes from the shareholders’ meeting (or board meeting) resolving on the new issue of shares.

There are no frequently used templates in the Swedish VC market (such as – eg, the NVCA or the BVCA template documentation). However, the market practice is harmonised and negotiations are usually efficiently conducted between reasonable parties (provided that all parties and counsels are accustomed to Swedish venture capital investments).

In Sweden, the most common investor safeguard mechanisms that VC investors typically are able to secure vis-à-vis other investors/founders and employees are the following.

• Pre-emption rights and subscription rights: All shareholders typically have a pre-emption right to subscribe in new financing rounds in proportion to their existing shareholdings in order to preserve their ownership level. Common exceptions include share issuances under agreed incentive programmes, during financially distressed situations and in conjunction with M&A undertaken by the company.
• Liquidation preference/exit preference: Investors typically hold preference shares, which entitles them to a liquidation preference ensuring that the VC investors at least get their investment amount back (either with or without a multiple) before any ordinary shares receive any exit or liquidation proceeds. It varies as to whether the VC investor also has the right to participate pro rata in any remaining proceeds along with the ordinary shareholders (a so-called participating liquidation preference). The standard practice in Sweden is to issue non-participating preference shares with a 1x liquidation preference. In distressed situations, VC investors are sometimes able to get a higher liquidation multiple and/or participation on their liquidation preference. 
• Reserved matters/veto rights: Investors typically negotiate a “reserved matters” catalogue, which reinforces investor protections. Such provisions typically restrict the issuance of securities that rank senior to those held by the investors and/or alter the rights of already issued securities.
• Anti-dilution rights: These are becoming more common in Swedish venture capital investments and typically they are in the form of a weighted average ratchet. Full ratchet anti-dilution provisions are uncommon in the Swedish market.

In Sweden, a VC investor would typically exercise its influence through its voting rights as a shareholder in the company and is typically able to secure the following rights to influence over management/the affairs of the venture in a shareholders’ agreement.

• Board representation: The lead and other larger investors often get the right to appoint one or more representatives to the company’s board. In case they do not want to appoint a board member – eg, in order to not be exposed to the fiduciary obligations that come with being a board member, the lead and other larger investors instead get the right to appoint a board observer without voting rights.
• Reserved matters/veto rights: Investors are typically granted influence over certain significant decisions through a “reserved matters” catalogue. The nature of such influence – whether as veto rights for certain specific investors or as voting rights for a group of investors/shareholders – depends on the overall shareholding structure as well as the relevant company’s negotiating position. The reserved matters typically include the following:
1. amendment of the articles of association;
2. decisions that would dilute the investors’ shareholding, such as changes to share capital and the issuance of securities;
3. approval of any dividend, distribution, or return of capital to shareholders;
4. changes in the company’s strategic direction, certain operational resolutions such as budgets, business plan, raising loans and initiating litigation above a certain threshold;
5. consent to voluntary liquidation, dissolution, winding-up, bankruptcy, reconstruction or reorganisation of the company; and
6. related-party transactions.
• Information and audit rights: investors typically enjoy information and/or audit rights, which allow them to access certain information regarding the company’s operations and financials as well as oversee their investments.

Representations and Warranties

In Sweden, the representations and warranties commonly observed in a financing round in a Swedish start-up or growth company are the following:

• power and authority;
• ownership of the issued shares;
• corporate matters;
• financial information;
• material agreements;
• related-party transactions;
• real property and other assets;
• IPR and IT;
• data privacy and GDPR;
• employees and pensions;
• tax;
• compliance, permits, etc;
• sanctions and anti-money laundering (AML);
• litigation; and
• disclosed information.

The level of negotiation and extent of the reps and warranties differs depending on the target company, its industry and its stage of development, with more extensive warranties often seen in later-stage funding rounds. A Swedish representations and warranty catalogue is typically less extensive than what is seen in the US. Further, disclosure letters are not common in Swedish VC investments.

Forms of Recourse

With regards to recourse, it is typically the founders and all or some of the other existing shareholders, depending on the situation, that give the representations and warranties to the investor in the investment agreement, severally and not jointly and on a pro rata basis. If and to what extent the company itself can provide, and be held liable for warranties, is subject to legal debate in Sweden. The prevailing view is that a company cannot be held liable to its investors (ie, in their capacity as subscribers of shares in the company) in connection with a new issue of shares, as the protection of the company’s creditors is prioritised over that of its investors. However, it is common that the investment agreements are drafted so that the company also stands behind the warranties (sometimes with the caveat, to the extent legally permissible) and that any claim will be compensated by the issuance of new shares at quota value (compensation shares), in which case all shareholders must have agreed to such issuance of shares (given that the arrangement dilutes the other shareholders in benefit of the indemnified investor). It is also not uncommon in Swedish investment agreements that existing shareholders are allowed to indemnify a claim by transfer of existing shares or a combination of cash and existing shares (due to the fact that the founders or other existing shareholders may not have the liquidity to satisfy a claim in cash, as the investment is received by the company).

Liability for warranty breaches is usually limited by both time restrictions and monetary caps. Further, in Swedish-style transactions, it is common practice that the warrantors are exempt from liability concerning issues that were (fairly) disclosed during the due diligence process, irrespective of whether the investor had actual knowledge of those issues.

Covenants and Undertakings

The investment agreement will include inter alia investor safeguarding covenants regarding the operation of the company’s business between signing and closing (which is to be conducted in its ordinary course of business), steps to be taken at closing by the company and existing shareholders (eg, undertakings to ensure valid issuance of the new shares) and condition precedents such as FDI approval(s) as well as consents from counterparties in relation to any change-of-control clauses (in each case if required)).

Further, the investor is safeguarded through restrictive covenants in the shareholders’ agreement (such as non-compete and non-solicit, as well as customary confidentiality clauses).

Various government programmes offer grants or subsidies to support innovative projects within growth companies. These programmes often encourage research and development, helping companies to develop new products or technologies that can attract private investment. Further, low-interest loans or guarantees are available to start-ups and growth companies, aiming to ease financial pressures and facilitate expansion. These loans can supplement equity financing, allowing companies to leverage additional capital for growth initiatives. These programmes collectively create a conducive environment for growth companies, making it easier for them to secure the necessary capital for expansion and innovation.

One relevant example is the state aid received by Stegra (previously H2 Green Steel) amounting to approximately EUR105 million, during 2024, from the Swedish Energy Agency (Energimyndigheten). However, following the media storm after Northvolt’s bankruptcy, the state aids granted on the Swedish market have been questioned and the Swedish government has since then decided to deny Stegra further funding (even though it had been approved by the EU).

The tax rules set out below apply to all Swedish limited liability companies (aktiebolag) and are not specific to VC investments.

Capital contributed to a Swedish limited liability company – whether through share issues, shareholder contributions, or loans – does not generally constitute taxable income or a VAT liable transaction.

For Swedish corporate investors, income (including interest) is subject to taxation at the statutory corporate income tax rate of 20.6% (2025), unless an exemption applies. However, Sweden offers a favourable tax regime for Swedish corporate investors through the participation exemption regime (näringsbetingade andelar). Under this regime, dividends and capital gains realised by a Swedish limited liability company on shares held as capital assets, are generally tax exempt, provided that the shares are unlisted.

An investment into a Swedish limited liability company by foreign investors does generally not give rise to a Swedish permanent establishment or a liability to file income tax returns in Sweden. Foreign investors without a Swedish permanent establishment are not subject to taxation on capital gains on shares and other instruments in Swedish limited liability companies.

Sweden does not levy withholding tax on repayment of principal and interest on loans paid to foreign lenders. Dividends paid on shares in Swedish limited liability companies to foreign shareholders without a Swedish permanent establishment are, as a general rule, subject to withholding tax at 30%, unless an exemption applies or if the tax rate is reduced under an applicable tax treaty (in certain cases to 0%). It can be noted that repayment of conditional shareholder contributions is for tax purposes considered as a repayment of debt and therefore not subject to withholding tax.

By way of government-controlled funds, the Swedish state maintains its role as an active investor in the Swedish venture capital landscape, providing both equity and debt financing to various investees. As outlined in 2.4 Particularities, these funds have played a crucial counter-cyclical role, particularly during periods of global downturn or tightening capital markets.

Furthermore, to address the asymmetric tax treatment of equity and debt – where returns on equity are subject to double taxation, while interest on debt is taxed solely at the level of the lender – Sweden implemented general interest deduction limitation rules effective as from 1 January 2019. Under these rules, companies may deduct net interest expenses up to 30% of their EBITDA or, alternatively, up to SEK5 million on a Swedish group level under a de-minimis rule.

In Sweden, the long-term commitment of founders and other key employees is typically secured through a combination of equity-based incentive structures and contractual mechanisms. These typically include the following elements.

• Equity-based incentive schemes: It is market standard for founders and key employees to be offered equity incentives – either through direct share ownership or participation in incentive programmes (such as options or warrants) – in order to align their interests with the long-term value creation of the company.
• Vesting and lock-in provisions: Vesting and lock-in provisions are widely used for founders and key employees in early-stage financings, particularly where founders retain significant ownership stakes. Such provisions typically make continued equity ownership conditional on ongoing engagement with the company over a defined period.
• Leaver provisions: Swedish venture capital transactions regularly include leaver provisions, distinguishing between “good leavers” and “bad leavers”, with differing consequences in terms of equity retention or forfeiture. Participation in equity programmes is typically contingent upon continued employment or consultancy engagement, although the scope and duration of such conditions may be limited due to applicable Swedish tax rules.
• Transfer restrictions: To maintain ownership stability and ensure alignment among key stakeholders, share transfer restrictions are commonly imposed on founders and key employees. These may include contractual lock-ups, rights of first refusal, and tag-/drag-along rights, typically set out in the shareholders’ agreement to ensure that founders and key employees remain invested in the company.
• Restrictive covenants: Non-compete provisions are routinely included in both the shareholders’ agreement and the individual employment contracts. Under Swedish employment case law, non-compete provisions in the employment contract are subject to specific statutory limitations, including requirements for post-termination compensation. By including such restrictions in the shareholders’ agreement, the company and its investors is provided an additional layer of protection against competitive activity by founders and key individuals, beyond the confines of employment law.

In Sweden, both equity and equity-based instruments are used for purposes of incentivising founders and employees as well as aligning the interests of founders and employees with the company’s long-term success. The choice of instrument often depends on the stage of the company, tax considerations, and the participants (eg, founders or employees). The most typical instruments include the following.

• Warrants (teckningsoptioner): Securities that are registered with the Swedish Companies Registration Office, giving holders the right to subscribe for new shares in the company at a later stage without requiring a new share issue at the time of exercise.
• Share options: Similar to a warrant, but a more flexible instrument which is based on contractual rights (call or put option) entered into with existing shareholders, allowing the holder to acquire or sell already issued shares under predefined terms.
• Synthetic options: Cash-settled instruments where the holder receives a payment, reflecting the value development of a share during a predetermined period, without granting any equity.
• Employee stock options (personaloptioner): The employee stock option itself is not a security, however, it entitles the holder to purchase equity or equity-based instruments in the future at a predetermined price or otherwise on favourable terms, generally subject to continued employment and/or other conditions.
• Qualified employee stock options (kvalificerade personaloptioner): Participants are granted an employee stock option, exercisable no earlier than three years and no later than ten years after grant of the option, and which meet certain other specific conditions, entailing that the employee will not be taxed on benefits when the qualified employee stock option is exercised. The purpose of the rules is to enable small, start-up and innovative companies with limited resources to recruit and retain key talent and thereby be able to grow by ensuring taxation is made as income of capital.

When determining the structure of an incentive pool in a Swedish company, certain tax considerations are key, particularly with respect to the timing of taxation and applicable tax rates.

Equity-based instruments, such as shares and warrants, are generally treated as securities for Swedish tax purposes, provided that they are not subject to far-reaching restrictions (eg, non-transferability or forfeiture upon termination of employment which are not limited in time). If they are, there is a risk that the equity instrument is instead taxed as an employee stock option or deemed to have been acquired when the restrictions lapse (typically upon disposal).

If a security is acquired below fair market value, the difference between the acquisition price and the market value is taxed as employment income at progressive tax rates up to approximately 52% at the time of acquisition. Additionally, the employer is generally liable for employer social security contributions on the benefit at a rate of 31.42% (uncapped). A subsequent increase in value is typically taxed as capital income at a flat rate of 25% for unlisted shares or otherwise 30% for an individual (unless the closely held company rules apply), and at 20.6% for a corporate investor if not tax exempt under the Swedish participation exemption regime (please refer to 4.2 Tax Treatment).

Benefits from employee stock options are normally subject to employment taxation and social security contributions when exercised (ie, when the employee acquires the underlying shares). However, under the special rules for qualified employee stock options, no taxation arises for the employee at the time of exercise, and the employer is not subject to social security contributions, provided that certain conditions are met. A later increase in value is typically taxed as capital income as described above.

Cash-based awards and return from phantom schemes are generally taxed as employment income when paid.

The implementation of an investment round and the setup of an employee incentive programme (ESOP) are closely related in terms of process and dilution. The relationship between investment rounds and employee incentive programmes is strategic, requiring considerations in relation to the size, structure, and timing to mitigate dilution while effectively retaining talent.

Establishing an ESOP pool leads to dilution for existing shareholders, which must be factored into the overall equity structure and valuation discussions during the investment round. Investors may seek to adjust the ESOP pool size based on negotiated terms, influencing equity distribution among shareholders. Hence, the size of the ESOP pool is usually discussed and agreed upon early in the process, whereas the actual implementation is usually carried out separately from the investment round to avoid complicating the closing process of the investment.

In the context of Swedish corporate governance, a shareholders’ agreement often includes a variety of exit-related provisions to safeguard the investors’ interests. These provisions usually aim to regulate the transfer of shares and facilitate exits. Certain provisions of the shareholders’ agreement are backed up by corresponding transfer restrictions in the articles of association, by the inclusion of a post-sale purchase rights clause, in order to prevent share transfers that violate the shareholders’ agreement. As an example, you will usually find the following provisions.

• Exit initiation: Investors typically possess specific rights related to formal exit proceedings. These rights often include the ability to initiate an exit through an IPO or a trade sale (usually connected to a specific time having passed since the investment), in order to ensure that the investors can manage their divestment and avoid lock-in effects by ensuring an effective way to liquidate their position. When initiating such exit, investors have the authority to appoint an adviser, such as an investment bank, to facilitate the exit process.
• Right of first refusal: The right of first refusal provision enables the existing shareholders to acquire shares with a priority right prior to such shares being transferred to a third-party acquirer, at the same price and terms offered by the prospective purchaser. It is common for the right of first refusal to apply on a pro rata basis amongst existing investors, and it usually also includes a secondary right for shareholders to acquire shares in the event that any of the existing shareholders decide not to exercise their primary right of first refusal.
• Tag-along rights: In the event of a sale of shares to a third-party acquirer and provided that not all such shares are acquired by existing shareholders pursuant to the right of first refusal, shareholders will typically have a right to tag-along on such sale under the same terms and conditions on a pro rata basis. The tag-along right may apply from the first share, but it is also common for it to be contingent upon a specific threshold being met – eg, 10% of shares in a single transaction or multiple transactions being effectuated to the same transferee. In essence, the tag-along acts as a protection for minority shareholders which may otherwise have difficulties exiting a portfolio company in case the majority decides to liquidate its positions and transfer its ownership to a third-party acquirer.
• Drag-along rights: These rights are intended to allow for a specified majority of shareholders to force minority shareholders to sell their shares in the event of – eg, a trade sale, ensuring that the transaction can proceed without minority holdout issues. One key point to remember is to include an authority for a representative of the dragging majority to represent the dragged parties during the sales process to further avoid any unnecessary hiccups during the sales process. The drag-along provision will typically require a qualified majority in order to be applicable, and such constellation can take many different forms, from including both a majority of ordinary shares and preference shares to specific veto rights for a certain class of share and/or investors.

While the authors have not seen any wholesale shift in exit-related rights, the slowdown in liquidity events is reshaping expectations and bringing more investor-friendly exit mechanisms into play, especially in later-stage rounds. There are also discussions around continuation funds and other structured secondary structures on the VC market in Sweden, particularly in light of extended exit horizons in certain verticals such as deep tech and life science, as well as insufficient IPO liquidity available.

During the hay days of 2021 and 2022, several IPO exits of start-ups took place in Sweden, including the IPOs of Polestar, Oatly and Truecaller. However, the Swedish IPO market has been relatively slow since then, leading to fewer IPOs in general. Although there has been an increase of notable IPOs of venture capital-backed companies more recently (such as Yubico’s de-SPAC listing in 2023 and subsequent uplisting to the main market at Nasdaq Stockholm in 2024, and the IPO of Cinclus Pharma), the IPO exit route remains challenging with insufficient IPO liquidity available. Despite the slow IPO market there is optimism for an upturn in IPO activity during 2025 and 2026, which should also enable IPO exits for start-ups.

There are multiple listing venues in the Swedish market, the most prominent of which are the regulated marketplace of Nasdaq Stockholm, being primary exchange for larger and more mature companies, and the MTFs Nasdaq First North Growth Market as well as NGM Nordic MTF, being a less regulated and more flexible trading venue suitable for smaller companies with high-growth potential. It is common that start-ups typically list on an MTF and make an uplift to the main market after a period of time.

Historically, start-ups typically have pursued offering structures consisting of a combination of existing shares (secondary offering) and new shares (primary offering). However, during 2023 we also saw the IT-security company Yubico’s IPO via a de-SPAC, which is quite unusual in the Swedish market.

The market for secondary shares in Sweden is generally very active with both Swedish and foreign investors acquiring shares in sought-after companies which may otherwise be difficult to subscribe for via typical fundraising rounds. This enables both investors and employees to liquidate their positions prior to the shares being publicly traded and is also used to clean up the cap table pre-IPO. Firms like Klarna, Northvolt, and Spotify (pre-IPO) have all seen structured secondary transactions. Today, it is quite common for growth-stage Swedish companies (particularly in fintech, deep tech or SaaS) to facilitate these deals.

In Sweden, the offering of equity securities by a private, non-listed company, is not subject to any specific securities regulations under Swedish law. However, private limited liability companies (privata aktiebolag) are subject to restrictions on how they can market and distribute their shares. In particular, they are not permitted to make public offerings and cannot extend an offer to more than 200 individuals. In the event that a company intends to raise capital to a wider range of public investors, the company must, prior to doing so, be converted into a public limited liability company (publikt aktiebolag) which – while distinct from being listed on a regulated market or a multilateral trading facility – allows for a broader issuance of shares.

The EU Prospectus Regulation (Regulation (EU) 2017/1129) applies to public limited liability companies, which sets out the conditions under which a prospectus must be prepared. In general, if an offering is directed to the general public (being defined as more than 149 individuals), a prospectus may be required, unless an exemption applies.

In venture capital transactions, these provisions become particularly relevant in larger financing rounds or in cases where numerous employees or other stakeholders hold equity instruments. Companies planning for expansion or broad-based equity offerings must carefully consider these legal requirements to ensure compliance and avoid unintended regulatory consequences.

While banking-related regulations may apply when investing in fintech and other companies under supervision by the Swedish Financial Supervisory Authority (eg, in relation to ownership assessment), Sweden has traditionally maintained an open investment environment with no general restrictions on FDI in Swedish companies. However, in December 2023, Sweden implemented the Foreign Direct Investment Act (the “FDI Act”) with an overarching goal to preserve and protect Swedish interests.

The implementation of the FDI Act has significantly altered the regulatory landscape for not only foreign investors, but national investors as well, as the FDI Act dictates that all transactions (including intra-group reorganisations) which are within the scope of the act must be notified to the regulators. The FDI Act establishes a mandatory screening mechanism for certain foreign investments, particularly those involving businesses engaged in activities deemed critical to national security, public order or essential societal functions. The scope of the act is broad and covers investments in sectors such as defence, energy, telecommunications and other strategically important industries. Depending on the nature of the target company’s operations, foreign and national venture capital investors may be subject to notification requirements and regulatory review, which could delay or, in rare cases, restrict an investment.

In order for the FDI Act to be applicable, the following conditions must be met:

• the investee entity or any of its subsidiaries must be incorporated in Sweden; and
• the transaction, irrespective of form (eg, green field investments, new share issues and acquisition of shares) must result in the investor:
1. acquiring at least 10% of the votes in the company (or increasing its existing stake to 20%, 30%, 50%, 65% or 90%); or
2. gaining influence over the investee – eg, by way of the right to appoint a board member or the right to influence the overall business of the investee.

Once it has been determined that the FDI Act applies, the process will, on a high-level, look as follows: a complete notification is filed with the Inspectorate of Strategic Products (ISP), after which an initial assessment (phase 1) is carried out by the ISP pursuant to which it has 25 business days to determine if an enhanced review (phase 2) is required. If the ISP deems that a “phase 2” review is required, such review can take up to three months to complete, extended by an additional three months if deemed necessary by the ISP. During the duration of the review period there is a standstill obligation until the ISP explicitly issues a no action letter or an approval (ie, no implicit approval when the statutory deadline lapses). It should furthermore be pointed out that a transaction not subject to a mandatory filing obligation may nevertheless be “called-in” at the discretion of the ISP.

During the period from 1 December 2023 until November 2024 (ie, the first year after the implementation of the FDI Act), the ISP received 1,206 notifications for which an enhanced review was initiated in 24 cases, out of which 11 investments were approved without any conditions and five approved with conditions. The large number of transactions having been notified to the ISP is likely a result of the risk of hefty fines and transactions being considered null and void in case of non-compliance with the FDI Act, together with certain difficulties in determining whether a transaction is in fact notifiable under the Act, given its broad scope and a lack of clear guiding precedents from the ISP.