While 2021 was undoubtedly a record year for VC across the globe, impact startup investment grew exponentially. This is particularly true in the Nordics, which raised $5.5bn (26% of all startup funding) in impact startups — more than three times the amount in the US.
In Sweden — specifically Stockholm — the figure is far higher. Growing from €1.3bn in 2020 to €3.6bn in 2021, Sweden surpassed even the UK and Germany.
As a result, Stockholm was crowned the home for impact startup investment. But how’d it get there?
Impact startups are defined as companies that address one or two of the 17 UN Sustainable Development Goals (SDGs) at the centre of its business. These targets provide a “shared blueprint” for peace, social inclusion and the sustainability of people and planet.
The opening up and accessibility of data can create a healthy, level playing field that benefits all players
Rather than seeing impact as an add-on to companies' objectives, impact must be at their core. For Invest Stockholm, “if you remove the impact you remove the business”.
At the end of last year, there were 460 impact startups in Sweden. This year, Stockholm launched an official campaign to recognise the city as the "home" opposed to the "capital" of impact — a shift in terminology that might explain why impact startups are such a priority.
Informally governed by the concept of folkhemmet or "the people’s home", Swedish politics hangs in the balance between socialism and capitalism. With the public’s right to access nature mandated by the concept of allemansrätten, there is also a reverence for the environment that predates the emerging global recognition of the climate crisis.
This heritage is compounded by universities and research institutions like the Stockholm Resilience Centre, which has been laying down pivotal ecological theories since the 60s.
Sweden’s patenting laws also mean that intellectual ownership lies with the researcher, rather than the university they work under. Jenny Berthling from Invest Stockholm accounts industries' cozy relationship with public agencies to “how the opening up and accessibility of data can create a healthy, level playing field that benefits all players”.
Taking climate action
As of last year, 158 of Sweden’s impact startups met the “Climate Action” SDG, followed by 119 in “Good Health and Wellbeing” and “Industry Innovation and Infrastructure” at 112.
Talent attracts talent. We’re seeing some amazing spinoffs, like one of our first interns who founded Volta Greentech, which produces cattle feed from seaweed
The Swedish auto industry is the cornerstone of European industry in terms of job and wealth creation — and it needs climate innovation. It produces roughly 20m vehicles a year and employs 13m-14m people.
“Assuming all these cars will one day be electric, our founders were quick to realise that Europe would be in big trouble if we don’t have battery production of scale operating here,” says Jesper Wigardt, head of corporate communications and public affairs at green battery producers Northvolt. Founded in 2017, Northvolt aims to have 20% of the European market of green battery production by 2030.
Northvolt’s headquarters are in Stockholm and their first (of three) gigafactories was in Skellefteå, Northern Sweden. Wigardt says the company looked at 1020 sites in the Nordic area.
“We looked at everything from logistics, infrastructure, proximity to harbours and airports, political climate, labour force, universities and of course, access to energy,” he says. “Making these batteries is a very energy heavy process, and it's important to consider both the cost and the CO2 footprint. The site has optimal access to wind, solar but predominantly hydro energy.”
Last year, Northvolt raised $2.75bn, becoming one of the world’s most successful business cases for impact investment.
Ultimately, “talent attracts talent”, Jesper says, adding: “We’re seeing some amazing spinoffs, like one of our first interns who founded Volta Greentech, which produces cattle feed from seaweed.”
Was 2021 a one-off for impact?
But the impact sector doesn’t just mean climate tech. Sweden-based Kry, by far the biggest operator of digital healthcare in Europe, raised €262m VC last year.
If you improve resource consumption within healthcare in the way we are, the impact on society is huge
“Healthcare is the largest sector there is in any westernised economy. It's anywhere from 12 to 18% of GDP in all countries,” says Kalle Conneryd-Lundgrens, Kry’s COO.
“It's safe to say that as we have seen over the last couple of years, and with an ageing population, this figure will go up,” he continues. “If you improve resource consumption within healthcare in the way we are, the impact on society is huge. I cannot see any other more impactful area to be operating within.”
But was 2021 a one-off for impact investment, following serious asset accumulation during the pandemic? For Conneryd-Lundgrens, it was the start.
“Everything stopped in many countries during Covid and no one hesitated in doing so. I think it has made quite a few people, investors included, realise that it’s very important where you put your money and focus,” he says.
Despite financial markets being in a serious squeeze, recent world events — namely Covid and the energy crisis spurred by Russia’s invasion of Ukraine — suggest that impact startups will be in increasingly hot demand.
However, there’s still work to do. The gender balance of Nordic impact startup founding teams is just marginally better than non-impact startups.
People who come here to work should be able to stay and contribute, if that's what they want
12% of Nordic impact startups have all-women founding teams, compared to 77% with all-men founding teams, and 11% with mixed-gender founding teams. Of non-impact startups in the Nordics, just 5% are founded solely by women.
For others, despite Swedish social benefits, there’s a difficulty attracting overseas talent.
“Our company is too small to navigate our hostile immigration regulations,” says Susanne Segeblad, CMO at deeptech startup Peafowl Plasmonics, explaining that recent candidates from India and Brazil both dropped out of their recruitment process because it was taking too long.
“It’s frustrating,” she says. “People who come here to work should be able to stay and contribute, if that's what they want.” Earlier this year, Peafowl Plasmonics raised €4m to work on commercialising transparent solar power to replace batteries and cables.
A precedent city
Nonetheless, Sweden continues to significantly invest in impact startups — through both nonprofit organisations and industry-driven projects.
Nonprofit foundation Norrsken in Stockholm runs an accelerator program for impact startups, in addition to raising three VC funds, managing three coworking spaces and hosting over 200 events each year.
It’s time that we pivot the idea of a unicorn. Let’s think about 1bn also meaning positively impacting 1bn people
The Norrsken Foundation’s Lisen Oliw stresses how unique this is: “Our partners Nordea, Nordic Capital, Afry and PwC offer pro bono support to our members, and subsidize membership fees for impact startups. We also collaborate directly with the city of Stockholm through our recurring "impact meetup" events. I haven't seen another city that does this.”
On the industry side, Gothenburg-based MobilityXLab offers startups and emerging companies within mobility the chance to accelerate with its seven founding companies: CEVT, Ericsson, Polestar, Veoneer, Volvo Cars, Volvo Group and Zenseact. One example of this is Polestar Project 0 which aims to produce a climate-neutral car by 2030.
Another lab in Gothenburg is BioVentureHub, which provides startups and academic groups with an opportunity to colocate and interact with experts from AstraZeneca experts — to advance life science, health care and the wellbeing of patients.
“It’s time that we pivot the idea of a unicorn. Let’s think about 1bn also meaning positively impacting 1bn people,” says Berthling. “That’s success.”
This year, Swedish impact companies and accelerators will be present at the Web Summit 2022 in Lisbon. Take the opportunity to know more about the Swedish impact scene, engage with startup accelerators and try Swedish fika at the Swedish booth located in pavilion 4, stand E461.