June 28, 2024

Is the Arctic on Its Way to Become the New Silicon Valley?

Editorial
Photo: Vadim_Nefedov/iStock

In recent months, several major tech companies, including Microsoft, Opera, and Google, have announced plans to invest billions of dollars in data centres and supporting infrastructure, education, and other projects in Arctic countries. The cool climate and sustainable energy make the region attractive to IT investors. However, big international corporations are not the sole drivers of this trend. Numerous IT startups and entrepreneurs are driving the region’s technological prosperity with the support of local authorities and governments.

Currently, the Nordic countries are the main northern hub of technological startups. These include everything from finance and cybersecurity companies to large battery factories and small robotics startups. A significant number of projects are pursuing sustainable energy and climate tech.

For example, Hystar is a deep-tech startup from Norway, founded in 2021, that has developed a system for the production of green hydrogen. Agreena from Denmark, founded in 2018, helps farmers adopt regenerative farming practices. Aira from Sweden supplies heat pumps and home energy technology to consumers. In Finland, Steady Energy aims to create a zero-emission nuclear power heating plant. According to Dealroom, these are some of the fastest growing teams in the Nordics.

Other Arctic countries are also actively supporting their tech companies. According to StartupBlink’s Global Startup Ecosystem Indеx 2024, among the Arctic countries, Canada remains the leader in startups, retaining its 4th place from last year. Sweden dropped one place to 6th, Finland dropped to 14th, and Denmark climbed to 18th. Norway experienced a slight setback and it is now ranked 25th. Iceland ranks 33rd, and Russia is 35th among the 100 countries.

Most of the startups and companies in the Arctic countries are located in their southern regions, below the Arctic Circle, near major cities and capitals. They are indirectly involved in the overall development of the Arctic. Fortunately, more and more “purely Arctic” startups are emerging in the north.

Kerecis, from a fishing town in Iceland, uses waste fish skin to produce sheets that treat burns and wounds. RID Capital Arctic, from Russia, is constructing a facility in Murmansk region which will produce construction mixes, iron-rich concentrate, concrete panels, and other materials from ash and slag waste. Northvolt, from Skellefteå, Sweden, produces batteries with minimal carbon footprint. Oura, a Finnish health tech company, has developed a health ring that tracks heart rate and sleep patterns. The company is headquartered in Oulu, a city right next to the Arctic Circle. The city, with its technical universities, played a central role in the evolution of several generations of wireless technologies. Now, researchers from the University of Oulu, the University of Tromsø, Norway, and other Arctic countries work on enhancing the network of small and medium-sized enterprises in the North. The project is part of the UArctic – a network of universities, colleges, research institutes, and other organisations spanning the entire Arctic.

Oulu was once called the Arctic Silicon Valley, but Professor Matti Muhos from the University of Oulu thinks that this model of supporting startups cannot be simply copied. “We want to contribute with our insight and support young entrepreneurs in the Arctic. We need a contextual understanding of what it means to build a business here in the Arctic, which generic models from other places, such as Silicon Valley, do not necessarily take into account”, Muhos said. He focuses on studying startup companies built by people who grew up in the Nordic context.

With the same goal in mind, the Alaska Small Business Development Center annually surveys more than 700 local business owners. According to their latest report, there is a clear rise in confidence and a strong desire for growth among Alaska’s entrepreneurs. In order to help them grow, governments and companies need to understand their needs and motivations. Most business owners say they need funds to buy new equipment, expand operations, and develop new products or services.

It is important to note that some of Alaska’s small businesses are based in remote locations where the government-funded infrastructure improvements can help immensely. Northern Europe is a great example—infrastructure and green energy are major reasons why big tech companies are so keen to invest in local projects. The majority of new business ventures in the Arctic are made with sustainability in mind. 

Good infrastructure allows less “business-friendly” areas of the Arctic to plan their future development. Governments and local authorities further promote innovation with grants and other forms of support. This year, Canada’s government committed an additional $1.7 to AI compute, startups, and education through its budget. Iceland has a Tech Incubator project and a funding scheme from Ministry of Industries and Innovation for the earliest development stages of innovative ideas. European Arctic entrepreneurs can also benefit from EU programs, such as EU Framework Programme for Research and Innovation. Local authorities can play an even more significant role in choosing a particular path for the development of their region.

Recently, a team of researchers from Nord University suggested a way to turn Northern Norway into the most forward-thinking business region in the country. Renewable energy and sustainable development play a big role in this scenario, as the country already generates 98% of its electricity from renewable sources. The region can become “a stronghold of blue-green growth”, as the authors called it.

The conclusions from the new edition of the EU Blue Economy Report support the Norwegian researchers’ ideas. The “blue economy” refers to the economic activities associated with the oceans, seas, and coasts. The Arctic Ocean plays a crucial role in the economic and environmental development of the Arctic countries, including the Northern Norway; therefore, the growth of sustainable blue economy will directly affect them. According to the report, ocean energy, blue technology, and desalination are some of the emerging sectors that currently create a variety of new business opportunities in sustainable development.

Sustainable projects and day-to-day sustainable living are attracting young talent. New generations are more attentive to the overall goals and motivations of the companies they work for. They also value work-life balance. Cahan Svensson, CEO of MindDig in Sweden, advises companies to think about the daily lifestyle that they offer their employees. Arctic countries already have many of these opportunities “built-in,” which should be a valuable point when attracting and retaining international talent. She also suggests bringing in employees from “outside” the region rather than enticing them from other companies and organisations.

According to the Arctic Demography Index from 2019, the population in some Arctic areas is on the rise, and the companies will soon have more local young talent. For example, the population in Northern Norway grew by 4.10% since 2011. Similar trends are seen in some parts of northern Sweden, as well as in the Nenets and Yamalo-Nenets Autonomous okrug in Russia. In northern Canada, the population growth averaged 10%, reaching as high as 104% in some areas.

Everything is connected. The existing sustainable infrastructure helps the region attract more funds for the development of local companies and startups. They in turn invite new talent to the northern territories of the Arctic. The growth of these companies, the sustainable practices and influx of educated people drive the overall economic development, strengthening the region’s thriving future.


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