Sweden’s tech sector is experiencing a resurgence driven by artificial intelligence, yet its potential is hampered by excessive regulation and bureaucratic obstacles, according to founders and investors. Despite government efforts to solicit feedback from startups, the prevailing sentiment within the industry is clear: the best course of action for policymakers is to step back and allow innovation to flourish unhindered.
The Paradox of State Support
The tension between state intervention and industry demand was on full display at Stockholm’s Techarena event. Deputy Prime Minister Ebba Busch asked startups to articulate their needs, only to be met with calls for deregulation. Tobias Bengtsdahl, a partner at venture capital firm Antler, succinctly stated the industry’s position: “Get out of the way.” This sentiment underscores a fundamental challenge: while governments seek to foster innovation, excessive oversight can stifle growth.
Sweden’s current boom, even larger than the wave that produced Spotify and Klarna in the 2010s, saw AI startups raise nearly $1 billion in 2025. Companies like Lovable have rapidly gained prominence, yet this success is threatened by systemic inefficiencies. The Swedish government’s past investments in infrastructure—including PCs and high-speed internet in the 1990s—laid the groundwork for success, but current policies risk undermining that progress.
Immigration and EU Hurdles
A key obstacle to growth is Sweden’s restrictive immigration system. Startups such as Legora, now valued at $1.8 billion, are doubling in size weekly, but are unable to hire talent quickly enough due to bureaucratic delays. Founders complain that the process for securing visas is unnecessarily cumbersome, with even high-earning employees being denied residency for minor infractions. The recent increase in nationality requirements from five to eight years further exacerbates the problem.
Sweden’s immigration policies are actively hindering its ability to compete in the global AI race. This is compounded by broader European-wide bureaucratic hurdles, particularly regarding employee equity and cross-border operations. Lukas Saari of Tandem Health reported spending six months navigating legal complexities just to understand how to offer stock options across different European markets.
The EU’s Role in Innovation
The EU Inc initiative, designed to streamline cross-border operations, offers a potential solution, but broader deregulation is still critical. Oscar Höglund of Epidemic Sound argued that the EU must reduce friction in company formation, hiring, and capital raising.
The AI Act and GDPR, while intended to protect citizens, are viewed by some as impediments to innovation. Bengtsdahl contends that the AI Act was imposed prematurely and will disadvantage European startups. Europe risks falling behind the United States unless it adopts a more flexible regulatory approach.
The Future of European Tech
The debate over regulation highlights a critical question: how can governments support innovation without stifling it? The consensus among Swedish founders is that less intervention is better.
The success of European tech hinges on its ability to balance innovation with oversight—a balance that currently leans too heavily toward restriction. The path forward requires a shift toward deregulation, streamlined immigration policies, and a more agile EU framework that fosters competition rather than hindering it.
