Norway is one of the richest countries in the world and its oil capital, Stavanger, is currently Europe’s fastest growing capital city. But what is the best and worst part of being startup in Stavanger, Norway?
- Population: 125,000
- Pros:One of the friendliest cities in the world, strong economy, digitally advanced and real governmental stability. Very rare cases of racism against foreigners. Setting up a business is extremely easy like lollypop.
- Cons: The cost of living in the city is a big barrier, while entrepreneurship is still a relatively new concept for many in Stavanger. Taxation is strong, strict and harsh.
- Cost:While it is one of the most expensive cities in the world, setting up a business comes with few hidden charges, particularly accounting and auditing cost.
- What to expect:A GREAT work/life balance, possibility one of the rarest and best in the world. A safe, family oriented, respectful, clean and naturally beautiful environment.
Stavanger is oil capital and has been Europe’s cultural capital. To get a better understanding of what all this could mean for the local startup, an interview of Indian entrepreneur, Rameshwar M Paswan, based in Stavanger was conducted. Rameshwar, CEO and Founder of Petroleumsoft AS, a technology oil service company, founded his first startup in Stavanger in 2009. Rameshwar is also CEO of Startup Entrepreneurs, a business incubation center; conceptualize as club for startups, mentors, investors and students.
What are best aspects of doing business in Stavanger?
Rameshwar: Stavanger is ranked as one of the most business friendly cities in the world. It is the fastest growing city in Europe with a varied and strong economy. Norwegians are known as digitally advanced and early adopters, willing and able to pay for new technology. This makes Stavanger a unique test market. You will find loyal, highly qualified expertise within information technology, finance, design, energy, life science and music tech. The startup scene is thriving, bridging entrepreneurs with industrial expertise, investors and talent. And, Stavanger is ranked top city in the world in terms of quality of life. Wealth, economic and governmental stability, well-developed communication and transport infrastructures and it’s long standing trade ties with the EU make Norway a relatively attractive and safe and easy country in which to do business. It also ranked ninth among 189 countries, in the Ease of doing business 2016 report published by the IFC and World Bank, illustrating just how easy it is to do business in the country. Norway is also a nation of early adopters of new technology. Stavanger as the oil and cultural capital leads this trend in early adoption. Stavanger is great test-market for start-ups operating within ICT, marine, energy and renewal energy.
What are the downsides to doing business in Stavanger?
Rameshwar: Stavanger is one of the most expensive cities in the world, primarily in terms of rental, restaurants and cars. It’s still a relatively small city with a rather homogeneous talent pool, even if one third of the PhD students at the University of Stavanger are foreigners.
The capital market for start-ups is undersized and includes a handful VCs and a fragmented Business Angel community, partly compensated through public support and soft funding. Since there are only five million people in Norway, high growth companies need to go global early and be prepared to incorporate abroad.
The combined high cost of skilled labour, materials, property rentals coupled with high income and corporate taxes all serve to lessen the appeal of starting up in Stavanger. Networking is still very much a new thing so developing contacts and partnerships in business can be slow. Entrepreneurship itself is also a fairly new thing. Norwegian based entrepreneurs definitely haven’t earned the ‘glorified profiles and demi-business god’ statuses enjoyed by their counterparts in the US or in other European cities. Here, entrepreneurs still suffer from the perception of being people who don’t really want to get a grown up job. This trend is changing and young generation putting their efforts to try startups and build startup ecosystem.
How would you describe the business culture in Stavanger?
Rameshwar: Norwegians are described as friendly, professional and honest with a no-nonsense business approach. Equality, trust and collaboration are some of the core values in the workplace, interpreted by flat organisations, informal communication and empowerment of employees. Instead of telling people what you want them to do, you can share what problem you need to solve and they will most likely fix it. Employees are expected to take both initiative and responsibility, be creative, flexible and efficient. Work/life balance is important to Norwegians. Biking, running, sailing and skiing are wildly popular within the business world. Don’t plan for meetings Friday afternoon, during Holidays or during the month of July.
The business culture in Stavanger reflects the country’s focus on egalitarian and social values. As a result, businesses have very little hierarchy, the majority has flat structures and the communication style is informal. Transparency and openness also score very highly in the value-chain. After all this is a country where ‘gate-keepers’ are a rare occurrence in business especially as CEOs openly share their mobile numbers on company websites. Although the latter practice has been widely criticized by many as an invasion on privacy and the government has taken steps to reduce the ease of access to such information, it serves to illustrate just how important transparency and openness are in business. This is such a transparent nation then its easy to know who is who by knowing phone number, address, tax paying, bank balance and business. Someone can easily find revenue, loss/profit, employees, director, board, and accountant of a company.
What are the costs of doing business in Stavanger?
Rameshwar: It’s easy to establish a business in Norway, the costs are low and running a business is straightforward. Overall skills and productivity are high, employees are loyal and the differences in wages are relatively low depending of the level of education. This makes technology businesses cheap to run, and the cost for setting up R&D activities is internationally competitive. The best part: No need to save for your kid’s college fund. Education is free, and every worker gets free health insurance. The government also covers parental leave for the mother as well as the father.
Along with those already mentioned, you can add the non-negligent cost of 30,000 NOK. This sum represents the start-up capital companies are required by law to have in the bank in order to incorporate a limited company. This can be quite a prohibitive cost for a start-up, especially when compared to other European states such as the UK where the cost of set it up the same legal structure cost 15,000 NOK.
Still believe it or not, five years ago the fee imposed by the government to set up a limited company was the equivalent of 100,000 NOK. This perhaps demonstrates willingness by the Norwegian government to reduce the high entry to barrier for start-ups in order to foster and cultivate culture of entrepreneurship and innovation outside the traditional sectors of oil, gas, clean energy and fishery.
The tax system is very strong and harsh. The major cost occurred with account maintenance, audit and tax. In my view, a company literally spent about 70% of the income to pay tax (50% as Employee tax, company tax, social security, VAT etc.) and maintenance reporting (20% for accountancy and audit).
What tips would you give to an entrepreneur thinking of starting-up in Stavanger?
Rameshwar: Stavanger is considered as a very friendly environment for entrepreneurs. Leverage the resources around you: Check out one of the many vigorous hubs for entrepreneurs in Stavanger, such as Ipark and Mess&Order. Be prepared to contribute and benefit from the start-up community. Get connected quickly to find enabling factors in the environment, including talented employees and the opportunity of soft funding from the Government. Take advantage of the full-digitized Stavanger citizens as a test market, build an international company and prepare to scale globally. Norwegians are among the happiest people in the world. Work hard & enjoy life in this beautiful city by the fjords, mountain and sea.
Regardless of high tax and cost of business operation, there are a number of government funding for startups in Stavanger. Innovation Norway and Research Council of Norway are major source of funding. Innovation Norway works a backbone for financial support for startups. They fund startups, organise startup meets, facilitate private investment, and organize entrepreneurial training. Most of their services comes with little or no cost. They organize and invite startups to attend their Entrepreneurial trainings in Boston, USA and Silicon Valley.
The officials in Innovation Norway are helpful, supportive and friendly. As a foreign national, I have never been discriminated but rather supported by Innovation Norway for my startup ventures. Innovation Norway advice, inspire and fund innovative technology startups. In fact, Innovation Norway is one of the major reasons for a startup to survive even in hard condition. I did survived and sustained in difficult financial situations and I can’t thank enough to Innovation Norway for their great help.
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