These boots are made for walking

ON MAY 14th Stockholm hosts the final of the Eurovision song contest: a camp, televised crooning event that draws nearly 200m television viewers. Bands competing for votes and fame relish exposure; the host city gets to promote itself for tourists and businesses. And a big selling point for the Swedish capital is its status as home to a string of successful digital firms, exemplified by a large music-streaming business, Spotify.

Tech and Stockholm have long thrived together. “Programming is the single most common occupation in Stockholm today,” says Mikael Damberg, Sweden’s minister of enterprise. An estimate, by the city itself, suggests the tech sector employs 18% of workers—far above the 10% said to be typical in most European capitals.

A digital boom is one reason why the Swedish capital region has one of Europe’s fastest-growing populations (2.3m people, up by 10% since 2010). It also explains why the city’s economy as a whole is rattling along at about 5% annualised growth; the city claims to be the fastest-growing in Europe. Stockholm can boast not only about its hordes of clever startups—Paris, Berlin and others brag about these too—but also of fully fledged firms. Torbjorn Bengtsson, of the city’s business-development council, says that since 2003 it ranks as the fifth city, globally, in nurturing unicorns, private firms valued over $1 billion. It got one-fifth of all European investments in “fin tech” firms between 2010 and 2014, he says. One, Klarna, an online-payments firm, was valued at more than $2 billion last year and is expanding in America.

Games firms do well, too. Microsoft bought Mojang (creator of Minecraft) for $2.5 billion, two years ago. In February Activision Blizzard, a Californian firm, snaffled up King Digital (maker of Candy Crush and other mind-numbing games) for $5.9 billion. Communication is another strength. Microsoft bought Skype for $8.5 billion, five years ago. Now Truecaller, a digital contacts book and personal organiser, is going great guns. It says it doubled global users to 200m in the past year, notably in South Asia and the Middle East.

The biggest of the lot, however, is Spotify, which streams music, sells advertising and has persuaded 30m users—at the latest count—to pay for tracks. Last year it was valued at $8.4 billion. In March it raised $1 billion, in consolidated debt, from a single round of financing. Visit its offices and you find vinyl records stacked in crates and rooms crammed with trendy-looking staff in their 20s.

Spotify is in “a hyper growth stage”, says an employee. It has 1,000 staff at its operational headquarters in central Stockholm, though the firm is legally incorporated in Luxembourg. A team of 53 exists to recruit “super talent” globally; the firm expects to double the number of employees at its main offices by, or soon after, the turn of the decade. By then, it might count as Europe’s first real example of a new tech giant. (SAP, an older software goliath in Germany, is worth some $83 billion.) “Spotify wants to grow, they are competing with Apple; I would love Spotify to challenge some of the big platform companies in the world,” says Mr Damberg.

As the industry leader in music-streaming, Spotify will expand as long as most musicians continue to co-operate with it (see Free exchange). Taylor Swift and certain other artists refuse to do so, but they are exceptions. More in doubt is whether Spotify will grow in Stockholm or shift elsewhere.

Last month its co-founders, Daniel Ek and Martin Lorentzon, wrote a public letter about Sweden’s business climate. The men raised three concerns. Employees who get stock options face whopping tax bills. Renting a home in central Stockholm has become eye-poppingly expensive. Both problems worry foreigners especially. Third, too few Swedish schoolchildren are learning to code: needlework and carpentry are compulsory, not programming. Unless politicians act, say Messrs Ek and Lorentzon, the firm could choose to grow somewhere else—Silicon Valley, perhaps.

That sounds a mite ungrateful. Stockholm has long promoted tech, and all but pampered those who exploit it. Subsidies have helped to get personal computers and the internet into almost every household, however poor. 3G licences were given out free, as long as firms got as many people as possible online and mobile. The metro has Wi-Fi. The city built a network to connect 98% of homes, and all commercial property, with fibre-optic cables (firms operate the services). Finance, notably venture capital, is easier to access in Stockholm than in many European cities.

A policy of welcoming foreigners also helps tech firms: Mr Bengtsson reckons as many as one-third of city startups are launched by first- or second-generation migrants. Each year an estimated 2,500 Indian software programmers apply for visas to work in Stockholm. Every tech job, in turn, creates 4.3 other jobs, often low-paid, according to a report by an advocacy group for American tech firms. Carl Bildt, an opposition politician, says “an open attitude to people coming from wherever to work” is hugely beneficial, as Sweden relies on imported talent. He wants the 100,000-odd refugees who arrived last year to be taught coding, so they can respond “to a huge demand for that sort of talent”.

Spotify’s complaints are not just self-interested, they are also carefully timed. Sweden is now debating a proposed legislative change to let employees in companies with fewer than 50 workers for a time enjoy lower taxes on stock options. Spotify and others are miffed that the reform would exclude bigger firms. Talk of growing elsewhere is obviously intended to spur a rethink. Mr Damberg says the government will listen and consider a bolder reform, but says Sweden has fostered lots of big, non-tech firms before, such as Volvo or IKEA, without dropping its egalitarian, high-tax approach.

Tackling pricey housing in Stockholm is harder. A banker with a young family, looking to buy, laments that prices have doubled in five years and properties sell in a frenzy of bidding. Regulated rental markets mean tenants at times resort to paying landlords under the table. Politicians in power talk a lot but do little to help.

As for schools, more teaching in tech is bound to come—the question is how fast. This month a pilot scheme of compulsory coding lessons is due to start in some Stockholm schools. One goal is to get more young women to take it up: Spotify says its Saturday camps for pre-teen programmers often have more girls than boys who attend; but by college age, male coders vastly outnumber female ones.

Even if it got all its wishes, Spotify might end up growing faster abroad in any case. What really matters, says Jessica Stark, who leads SUP46, a lobby for Swedish tech firms, is the broader signal to many other start-ups as they grow—who voice the same complaints as the music-streaming company. “Stockholm should definitely not aspire to be Silicon Valley, but that doesn’t mean we can’t compete with it,” she says. In at least one area, however, the Swedish capital will always have the upper hand: Silicon Valley will never get to host Eurovision.